I having some issues with chunk blending, and when i’ve test upgrading 1.17.1 world to most recent version 1.21.5 Release Candidate 1, the game dont merge the chunks from older version to new version, making none type of smooth transition between chunks.
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The game cancelling chunk blending after reloading a world appears to be a side-effect of this issue: MC-295665
As soon as a chunk gets updated from an older version to the world’s current version, it no longer blends into other chunks. The game only remembers that it updated that chunk in the current session, but “forgets“ that it updated that chunk as soon as the player quits.
In 25w08a and before, the tag blending_data had the purpose of forcing the game to blend a chunk with this tag into other chunks, especially between chunks with the same DataVersion. Since 25w09a the tag blending_data is added to the chunk when it is updated, but apparently has no longer an effect on blending chunks when using Optimize World or when quitting and reloading a world while chunks were actively blended.
Did you happen to quit the world/game while those chunks were being loaded (MC-295409)?